Industry analysis Consumer Cloud Storage

What will it take to “Cross the Chasm”?
An industry analysis of the consumer cloud storage industry and
the adoption lifecycle of exclusive cloud storage

Niven Singh
December 3rd, 2012

Table of Contents

Table of Contents ........................................................................................................................ 2

Executive Summary .................................................................................................................... 3

Background & Industry Development ........................................................................................ 4

Industry Analysis ........................................................................................................................ 6

Crossing the Chasm ................................................................................................................ 6

Results ......................................................................................................................................... 9

Competitive Position Compass ............................................................................................. 10

Moving Forward ....................................................................................................................... 12

Closing ...................................................................................................................................... 14

What will it take to “Cross the Chasm”? Niven Singh 2

Executive Summary

In 2011, the average storage capacity of digital content per household reached upwards of
464GB, with forecasts suggesting average capacity to increase to 3.3 terabytes in the next
four years. The need for digital storage has greatly increased over the last decade and as a
result, alternative storage solutions have emerged; most recently, consumer cloud storage1.
According to a study by Ipsos Market Research regarding cloud storage use in 2011, 66% of
respondents (18 years and older) claimed familiar and interest based use of the cloud.
Partnered with Gartner’s forecast that predicts worldwide users will comprehensively go
from storing 329 exabytes to 4.1 zettabytes in 2016, this indicates the need and positive
attitude towards consumer cloud storage as a digital storage alternative.

With cloud storage subscriptions surpassing projections for 2012, the number of users
worldwide topped 375 million at the end of Q2 2012. The original forecast for 2012 was
500 million at most. Subscriptions are expected to jump even higher in 20132. Cloud
storage offers a number of benefits in its adoption3 like mobile access, ease of sharing and
storing and is cost effective storage option. However, consumers are not willing to
completely transition to cloud storage yet or considered it as a primary solution for their
digital storage needs. Concerns of cost, security, recovery and more have limited users from
moving completely to the cloud, relying on hybrid storage solutions and on premise
backups. Therefore, the question emerges – what will it take for complete consumer cloud
storage to truly “cross the chasm” and become a competitive storage solution for the mass
market?

Using concepts from Geoffrey Moore’s popular book Crossing the Chasm: Marketing and
Selling High-Tech Products to Mainstream Customers4, this report will focus on applying and
analyzing the Technology Adoption Lifecycle (TALC) and Competitive Position Compass in
relation to consumer cloud storage. The frameworks selected for this analysis accounts for
the complexity of the potential adoption lifecycle of consumer cloud storage and provides
insightful support to recommendations. These recommendations relate to how industry
players should concentrate on addressing prominent user concerns in order to better
appeal to the mass market.

A background of the cloud computing industry will set the foundation for applying the
frameworks mentioned. That followed by an explanation of individual needs of each
segment in the TALC will illustrate the diverse profiles of various users and lend itself to
identifying where the “chasm” lies in the market. Lastly, a discussion of consumer concerns
and hurdles facing cloud storage providers will lead to recommended steps providers need
to take in order to cross the chasm into mainstream usage.

1 http://www.statista.com/statistics/200551/global-sales-figures-of-hard-disk-drives-from-4th-quarter-2010/
2 http://www.zdnet.com/consumers-actually-really-like-cloud-storage-report-says-7000005784/
3 http://www.smallbiztechnology.com/archive/2011/09/cloud-computing-the-risks-and-benefits-of-cloud-storage.html/
4 Moore, Geoffery. Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. Print


Ultimately, cloud storage providers need to overcome the critical hurdle of consumer trust.
Like all new technology, developing trust, accessibility and a “whole product’ are critical to
mainstream success. Consumer cloud providers must address user concerns and needs so
as to appeal to the mass market. By applying the results of this analysis and implementing
suggested changes, complete cloud storage will inevitably cross the chasm.

Background & Industry Development

Digital storage solutions first emerged in the early 1950s, with the first hard drive built in
1953 by IBM. The recognized need for rapid random access at a low cost was apparent, and
with this new invention, a new level of computer data storage was created5. Once hard
drives entered mainstream markets, the maximum capacity of a hard drive for person use
was 5 megabytes. Fast forward to the mid 1990s, the typical hard drive capacity in a PC
was 1 gigabyte6. Comparatively, of January 2012, the average desktop hard drive held 500-
2000 gigabytes, with additional external hard drive options up to 4 terabytes7. The
exponential growth in storage needs of users has resulted in 91% of adults in the United
States using computing devices relying on digital storage8.

Similarly, the concept of cloud computing was coined in 1961 by John McCarthy9. During
the 60s and 70s, the development of cloud computing continued organically as networks,
emails and instant messages were developed. Fundamentally, the concept of cloud
computing today is the same as it was in the 60s – rapid access to digital data stored in an
on or off premise server, accessed via network cables or in today’s age of technology, via
the internet. Since then, cloud computing gained popularity as a result of Salesforce.com’s
launch in 1999 of the first site to deliver software-as-a-service (SaaS) through a website –
officially known as “cloud computing”. As time progressed and the burst of the dot com
bubble, technology companies redefined themselves, integrating the internet and cloud
computing as a core component. In 2002, Amazon introduced Amazon Web Services10 and
then in 2004, Facebook emerged, changing the way people communicated and stored
photos and videos11.

Since then, a number of advancement and product offerings emerged from key industry
players. Amazon expanded its web services department offering Elastic Compute Cloud
(EC2). This program allowed users to access and run their own programs virtually, all in
the cloud. Amazon also introduced Simple Storage Service (S3) in 2006, formally

5 http://en.wikipedia.org/wiki/History_of_hard_disk_drives
6 http://www.forbes.com/sites/tomcoughlin/2012/10/03/have-hard-disk-drives-peaked/
7 http://royal.pingdom.com/2010/02/18/amazing-facts-and-figures-about-the-evolution-of-hard-disk-drives/
8 http://www.enterthenet.com/pew-research-generations-and-their-gadgets/
9 http://www.salesforce.com/uk/socialsuccess/cloud-computing/the-complete-history-of-cloud-computing.jsp
10 http://aws.amazon.com/ec2/
11 https://www.facebook.com/


introducing pay-as-you-store models to the industry. Salesforce.com then introduced the
concept of platform-as-a-service (PaaS), allowing companies to develop and run their
business in the cloud. Then in 2009, Google Apps premiered, allowing people to create, edit
and store documents entirely in the cloud12. Google was one of the first providers to offer
free access to online storage to users with a Google e-mail account. Along the same line,
Apple13 provided exclusive cloud storage access to Mac owners through MobileMe, later
named iCloud services. These companies have continued to offer cloud services and storage
capacity as an added benefit to other offerings.

Because cloud storage is not the core offering of many of the aforementioned companies, it
is likely that a number of new entrants will rise. This will raise the level of competition in
the market, providing consumer with options. Although the main providers are companies
with strong brand reputations, they likely will have to fight to keep their current market
share. As indicated by the number of current players in the industry, costs to enter
this market are low, as are costs to develop a product or new service. As a result, smaller
companies like Dropbox14 and Evernote15 have emerged, offering cloud services exclusively.
There may be a potential influx of smaller enterprises offering solely cloud storage services,
ultimately providing more opportunity for consumers to find product offerings that align
with consumer needs.

The ease of access to the internet has resulted in mainstream integration of cloud
computing into daily operations, both personal and professional. For companies, this
means savings in business operations and alternative solutions for IT needs. For the
personal consumer, accessing the cloud is an integrated aspect of society’s digital footprint
with the use of social media and instant communications. In 2011, 66% of internet users in
the United States used cloud based storage or backup services16. Looking globally, a case
study by AMD found that 70% of respondents indicated they are either using or currently
investigating cloud computing for remote storage17. These statistics point to the adoption
of cloud computing as a storage alternative.

Considering the cloud computing industry as a whole, there are a number of factors that
will influence the trajectory of the cloud storage industry. Specifically, R&D and technology
innovations will play a critical role in the ever changing nature of the industry. The
constant incremental changes have shaped and will reshape the available service offerings
and the overall competitive landscape. Other forces that will affect the industry range from
market competition, government intervention or deregulation, policies and the social and
demographic practices. These factors have and will continue to influence the adoption of
cloud product offerings.

12 https://drive.google.com/#
13 https://www.icloud.com/
14 https://www.dropbox.com/
15 http://evernote.com/
16 http://www.statista.com/statistics/198922/usage-of-cloud-based-storage-services-in-the-united-states/
17 http://www.amd.com/us/press-releases/Pages/study-cloud-computing-2011jun01.aspx


The most critical hurdle the industry is currently facing is the lack of trust established
between consumers and cloud storage providers. According to a study done by Citrix in the
US earlier this year, the top three reasons adults (18 and older) are hesitant to use cloud
computing services are cost, security and privacy concerns. As stated earlier, consumers
are willing to store personal digital materials on the cloud. Nevertheless, they are not
willing to move solely to the cloud, giving up the option of on premise storage (i.e. – hard
drives). Additional apprehension lies in regards to accessibility and regulations, as well as
backup and recovery. At the moment, an on premise back up is the only guaranteed method
of accessing and recovering data if the cloud goes down. Therefore, consumers are
reluctant to detach from a “hybrid” storage solution, both on premise and in the cloud, to
give up control over their content. Consequently, cloud storage has yet to become the first
choice of digital storage alternatives and completely transitioning to the cloud seems to be
far fetched.

Industry Analysis

In the following section, the frameworks from Geoffrey Moore’s book Crossing the Chasm:
Marketing and Selling High-Tech Products to Mainstream Customersi18 will be the basis of
this report. The “Crossing the Chasm” and “Competitive Position Compass” frameworks will
be introduced and applied to the cloud storage industry, with specific focus on consumers
completely transitioning to cloud storage, ultimately giving up hybrid storage. The
frameworks will be defined, configured and applied to determine what factors cloud
storage providers and the industry as a whole need to consider integrating in future
attempts to cross the chasm.

Crossing the Chasm

Authored in 1991, Moore developed this framework to describe and identify the crack
between two specific stages of the technology adoption curve. Crossing the chasm argues
that as technology moves through the TALC, the transition between Early Adopters and the
early majority is where difficulty lies. It is here that companies tend to falter in their ability
to capture the early majority due to their incapability to tailor to the different needs of each
group. Furthermore, this framework is one that is closely related to the innovation
diffusion curve, with identical consumer segments and is commonly used in collaboration
with the competitive positioning compass to conduct strategic planning.

Looking specifically at the TALC (Figure 1.1), there are five domains illustrated in the
framework: Innovators, Early Adopters, Pragmatists, Conservatives and Laggards. Each
group has a persona that encompasses distinctive needs and concerns with regards to how
the group perceives innovative technology. Take note of the unique differences in outlooks
between the Early Adopters – the Innovators and Early Adopter combined – and the



Pragmatists. That is where “the chasm” sits in the consumer cloud adoption lifecycle, and is
the transition technology firms struggle with most. Below is a description of each segment
persona:

(Figure 1.1) Technology Adoption Life Cycle

Innovators, also known as tech enthusiasts, make up roughly 2% of the market. . This group
tends to seek the truth and appreciate technology for the sake of it. Although they are the
first adopters of a new technology, there is little monetary profit to be gained from winning
over this group. Their real value lies in references that will transfer over to the next stage
by introducing new technology with a form of authority. Their risk tolerance and informal
expertise lend to becoming a trustworthy reference for the Early Adopters. Despite being
fairly price sensitive, their feedback is valuable and essential to capturing the whole
innovator group, and the next adoption group.

Early Adopters, or visionaries, compose 15% of the market. They are the believers in a new
product or service and are crucial to the high tech industry because they are willing to
invest and take high risk. They seek strategic opportunities and high returns, and are
comfortable with chasing after evolving technological dreams as a result. Because of their
willingness to invest and take risk, this group of adopters are hard to satisfy and demand a
lot from their product or service. As a result, they are likely the driving force behind a
company’s “big break”. Therefore, this is the first cash influx for a company. With that,
these Early Adopters will require testing and want to help evolve the product or service
until they are content and perceive potential mass market appeal.

Pragmatists, or the early majority, make up one of the largest group in the technology
adoption lifecycle. Capturing 34% of the market, these adopters are critical and price
sensitive. Despite having resources, they are looking for the “whole product” that offers
incremental change, a cost benefit to purchasing and appreciate reliability, evidence and
integration. Pragmatists rely on a competitive market as it breeds proficiency and suggests
that the product is credible if offered by a number of large providers. They appreciate


purchasing from market leaders because they know an ecosystem will be created
surrounding the product. This group is the most difficult to persuade as they critically
reference their peer group before making major technology purchases. Unlike the two
previous groups, Pragmatists only find value in likeminded referrals and disregard the
Innovators and Early Adopters.

Conservatives, also known as the late majority, make up an identical 34% of the market.
This group shares all the concerns of the Pragmatist group, with one added issue. Unlike
the early majority group, Conservatives are not confident in their ability to use technology,
therefore are not comfortable enough to purchase it until they are convinced there is a
supportive environment surrounding a product or service. As a result, Conservatives wait
until something has become a standard product to buy from a big, established company.
Because this group makes up a third of the buying power, it can be a highly profitable
market segment to target. Until a product or service has been established for an extended
period of time, proved viable and provides extensive support, this group is likely to hold
out on adopting.

Laggards, or lastly known as skeptics, are the consumers that simply don’t care for new
technology for various reasons. This group is typically regarded as not worth targeting. As
a product progresses through the adoption lifecycle, by the time it reaches this group, it
often becomes self-cannibalizing. As consumers, they tend to point out flaws and
deficiencies in products they are uninterested in and have no drive to join the technological
world. The inherent purchase of technology will be forced by unavoidable change or
technology being ingrained in another product that they are unaware of.

Because the expectations of each group are characteristically different, if a company fails to
target their product to a specific group, and markets to a broad, generic audience, it is likely
that the technology will not cross the chasm and likely never will. By targeting each faction
specifically, a company can leverage each segment’s expectations to better respond to
demands and concerns. To better understand the differences between the various groups,
below is a wide-ranging list (Figure 1.3) of concerns voiced by members of each adoption
lifecycle segment pertaining to adopting exclusive cloud storage. Gathered through primary
and secondary research, the concerns by segment further support the distinct differences
in purchasing habits, demands and concerns of each group before they are willing to adopt
this particular technological advancement.

Technology Adoption Lifecycle Segment Concerns
 Encryption
Innovators  Privacy
 Cost
 Privacy
 Shared Personal Data
Early Adopters  Bugs  Evolution of Product/Service


 Privacy
 Reliability
 Backups
 Data Loss
Pragmatists  Data Access
 Integration
 Primary and Secondary Reviews
 Losing out on physical backups
 Quality
 Support
 Privacy
 Reliability
 Backups
 Data Loss
Conservatives
 Data Access
 Integration
 Primary and Secondary Reviews
 Losing out on physical backups
 Quality
 Quality
Laggards  Status Quo
 Cost

(Figure 1.2) Key Concerns by Technology Adoption Lifecycle Segment

Results

It is clear that the concept of consumer cloud storage has indeed crossed the chasm,
supported by the large statistics showing consumer cloud use. However, consumers have
yet to actually adopt the functional aspect and exclusively moved to the cloud. By applying
the “Crossing the Chasm” framework, it is evident that it has fallen short of the Pragmatist
group. To get to the right side of the chasm, cloud storage providers need to meet the
demands of the Pragmatist group, as they are the gatekeepers to the mass markets. These
customers want the “whole product” readily available from the onset, and are not willing to
compromise. A key insight to marketing technology in attempts to “cross the chasm”, in
that the former groups (Early Adopters) are willing to take responsibility for piecing
together a product based on a piece of technology, where as the Pragmatists and Late
Majority are not. The argument has been made that typically Pragmatists are choosing
inferior products, but if packaged correctly, a “whole product” is considerably more
superior to this faction. Because cloud storage providers have not been able to create a
“whole product” that exemplifies support, cost benefits, evidence and reliability, they will
be unable to convince the early majority groups.


Similarly, in reference to Figure 1.2, a number of the concerns voiced by the Pragmatist
group have yet to be formally addressed or provide evidence. Because this segment has
specific needs that haven’t been prioritized by cloud providers, these priorities at a
minimum are the basis for why consumers are continuing to use hybrid storage solutions
rather than exclusively storing data on the cloud. Although customers are curious and
interested in cloud storage, the reliability aspects are still lacking to meet the requirements
demanded. As a result, the cloud storage providers are the ones blocking themselves from
crossing the chasm. Despite being well established key players in the market, they haven’t
incorporated the aforementioned concerns, limiting available options for Pragmatists to
select from, resulting in resistance.

This is not the end for exclusive consumer cloud storage. Although consumers are not
completely dependent on cloud storage yet, it has made great strides and is on the cusp of
doing so. Data supporting consumer interest and industry growth suggest positive growth
in the upcoming three years19. But for consumer cloud storage providers to break through
the proverbial wall to the mass market, they need to strategize marketing tactics and
develop a trusting relationship with consumers. They need to integrate the needs and
concerns of their customers and develop a “whole product” to market. By doing so, digital
consumers will ultimately leave on-premise and hybrid storage solutions behind,
preferring cloud storage solutions due to the many benefits.

Competitive Position Compass

Because consumer cloud storage is on the cusp of “crossing the chasm”, now is an ideal
time for companies to consider more targeted approaches to marketing to various
segments. Using the Competitive Position Compass20, this model defines valued factors by
each segment at any stage of the TALC. With this model, a company can determine what
would be most reasonable criteria to target for each group and then build a competitive
positioning strategy around the comparative values that are most relevant. It also identifies
what criteria each segment in the TALC is looking for based on their placement on the
compass.

There are four domains of value in the technology market illustrated in the Competitive
Position Compass (Figure 1.3): technology, market, product and domain. As a product
progresses through the TALC, the value of each domain alters in relation to which group
values it most. Looking at the framework, technology and product are the two domains
most valued earlier on in the adoption lifecycle, in the tech enthusiast and visionary phase.
However, as the technology progresses and “crosses the chasm”, the focus shifts to the
market and company providing the product or service. This represents the transition from
product based values to market based values.

19 http://www.gartner.com/it/page.jsp?id=2060215


(Figure 1.3Competitive Position Compass

Two aspects of this framework to keep in mind are the axis. The horizontal axis ranges
from specialist to generalist, which is indicative of the consumer expertise level. Similarly,
the vertical axis ranges from skeptics to supporters, which represents buyer attitude
towards the proposed value proposition offered by said product. Generally, as a product
passes through the adoption lifecycle, the market domain begins in a state of skepticism,
eventually evolving into supporters once demands and criteria are met. This is imperative
to understand during the marketing process as it requires moving communications from a
state of support and excitement to one of skepticism and disinterest, transitioning product
based offerings to an unfamiliar market oriented space.

Another critical aspect of the Competitive Position Compass is the value based adaptation
(Figure 1.4). This format of the framework indicates what criteria are required in each
domain to continue the evolution of the product, moving it through the TALC. As the
product progresses from the initial technology domain, the evidence needed to appeal to
the Early Adopters differs from that needed in the market domain, which would appeal to
the Pragmatist group. Relating back to the Figure 1.2, the concerns that users voiced
correlate to the evidence that appeals to each domain. The examples of evidence in each
domain relate to the various types of confirmation or data that consumers would want to
know before adopting a product. Indicators like demos, third party reviews, benchmarks
and endorsements are just some of the value based criteria that are vital to understanding
the demands of each domain.


(Figure 1.4 Competitive Position Compass

By applying the Competitive Position Compass and value based adaptation, it is clearly
indicated that the position of the product in the TALC and the demands and needs of each
market segment are critical aspects of appealing to the mass market. To incorporate all
aspects, cloud storage providers would need to develop a more market oriented approach,
supplemented by the previously established product oriented approach to win over the
Pragmatic/Skeptics in the market. Based on the prior analysis and background context,
cloud providers are in a good position to do. The market is already built on competition,
offering variety, opportunity for references and comparison that will eventually satiate the
Pragmatist appetite if continued. What needs to be resolved is the gap between what the
product offering and what the consumers want. Once cloud providers are able to provide
evidence to the early adopter’s standards, they can begin working on creating the “whole
product” that appeals to the early majority.

Moving Forward

As you can see, exclusive consumer cloud storage has yet to completely “cross the chasm”.
This is due to a number of issues, primarily, the unresolved gap between the product
offering and consumer demand and the issue of consumer trust. Cloud storage providers
are in a position to adjust their product offerings to adapt and overcome the
aforementioned hurdles. To address these hurdles, the first step cloud providers need to
pursue is providing each segment of the TALC evidence to support completely transitioning


to cloud storage. In the case of Innovators and Early Adopters, cloud storage providers
have supplied sufficient evidence, relating back to the Competitive Position Compass.
However, when transitioning to the Pragmatist group, what they demand in terms of
evidence changes. And cloud providers need to adapt to that change. Because of the lack of
evidence, the Pragmatist group will continue to resist completely transitioning to the cloud
because they have no proof verifying it is a reliable solution for their needs21. Concerns
about accessibility, reliability, backup and recovery are just the tip of the iceberg in regards
to issues that need to be addressed.

Once providers are able to address each segments demand for evidence, the next step
would be to establish their competitive position within the market. Firstly, cloud providers
need to identify a competitor within the market and then differentiate themselves from
said competition. The Pragmatist group appreciates competition and a market-oriented
approach. By identifying a direct competitor within the consumer cloud storage market,
cloud can and should differentiate themselves by taking on an expertise or niche. This
drives competition will invariably creates room for growth and new entrants into the
market. This will also result in opportunities for the Pragmatists and Conservative
segments to research, analyze third party coverage and seek out references, which
ultimately will lead to acceptance of a new technology.

An example of this would be for Google to identify Apple as its main competitor in this
market22. By doing so, Google can juxtapose its offerings to Apple’s, illustrating the
differences in core offerings based on consumer needs. Apple has positioned its cloud
offerings as a means of connecting every aspect of one’s digital persona. Google on the
other hand is known for its business apps, content creation and storage in relation to
academic and professional work23. Therefore, Google has differentiated itself from its main
competitor, and can develop strategic and targeted marketing tactics within that niche. One
thing to consider is the difficulty associated with determining a direct competitor. Moore
suggests that if a company can’t choose a competitor, it indicates the company is having a
hard time finding a clear market differentiating factor. This proposes that a product
offering or company is not ready to cross the chasm.

Simultaneously, cloud storage providers need to package their offerings as a “whole
product”24. Considering the supplemental aspects Pragmatist and Conservative groups look
for; creating a product offering that incorporates the generic offer and benefits of the
augmented product combined with the added complimentary additions can prove the
development of an ecosystem. If providers are able to package their product offerings in a
way that cloud storage can integrate more so with other products, providers will create a
demand for it. This is a key selling point that will help transition the product or service
offering from one end of the TALC to the other, thusly crossing the chasm.

21
http://crossingthechasmreview.blogspot.com
22
http://www.youtube.com/watch?v=EaW9-nSFh_o
23
http://www.cloudtweaks.com/2012/06/apple-vs-google-the-great-cloud-war/
24
http://www.nexentra.com/RSS_Feeds/NEXENTRA_Viewpoints.html


Closing

Regardless of the current stature of cloud storage technology or the industry as a whole, if
providers take the initiative and go through the abovementioned steps, exclusive consumer
cloud storage will cross the daunting chasm. Companies currently are missing the mark
with adapting their marketing tactics when approaching the Pragmatist group.
Understanding the underlying demands and expectations of this group, and adjusting the
product or service offering is the only way for a company to move technology into the
mainstream market. Hopefully, with extensive backup and recovery triggers in place and
insurmountable evidence, consumers will come to trust cloud providers and grant them
sole ownership of their digital persona. It will just take repositioning of ones product
offering and a better understanding of the market.


Industry analysis Consumer Cloud Storage

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